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In 1996, Johnson & Johnson was the undisputed king of bare-metal stents. Stents are the mesh tubes that prevent arterial collapse after balloon angioplasty, the principal treatment for atherosclerosis: A balloon is inserted into an artery to clear away plaque and is removed. Then a stent containing another balloon is inserted into the artery. The balloon is inflated to open the blocked artery and push the stent against the arterial walls; this balloon is then deflated and removed. J&J held a strong patent portfolio that gave it dominance in the U.S. stent market. It also led in Europe, where it faced stiffer competition.

Stents revolutionized the treatment of atherosclerosis in coronary and peripheral arteries, but they did little to address one of the chief problems with balloon angioplasty. In about 30 percent of cases, scar tissue formed around the site of the injury, causing the artery to close again, a setback called restenosis. Stents reduced the restenosis rate slightly, but it was still high.

Today, restenosis in coronary arteries afflicts less than 10 percent of patients thanks to the development of the drug-eluting stent (DES), which slowly releases a drug that inhibits the growth of scar tissue. Drug-eluting stents now command more than 90 percent of the $3 billion U.S. coronary-stent market, according to the Millennium Research Group. DESs have not been approved for peripheral arteries.

Johnson & Johnson pioneered the new generation of stents, but the $50 billion company lost its dominant market position to a partnership between medical-device company Boston Scientific of Natick, MA, and Angiotech Pharmaceuticals of Vancouver, BC. The two companies signed a pact in 1997 that led to the development of Boston Scientific’s Taxus stent, which was introduced in the U.S. in March 2004.

Taxus was arguably the most successful new medical product in history, netting more than $1.4 billion in sales in its first nine months in the U.S. alone. And that’s despite the divergent business models of the companies that created it.

The project dates to 1996, when Bill Hunter, cofounder and chief scientific officer of Angiotech Pharmaceuticals, approached J&J and other stent makers with his own solution to the restenosis problem. His company had obtained a license to produce paclitaxelbetter known by its brand name, Taxolan anticancer drug derived from the Pacific yew tree. Approved as an anticancer agent in 1992, it is marketed by Bristol-Myers Squibb. Stents coated with the drug worked remarkably well in animals, keeping rat arteries clearer than uncoated control stents did. Hunter made the rounds of the stent manufacturers, including J&J, Medtronic, Guidant, Boston Scientific, and Cook.

Angiotech and J&J engaged in discussions, though J&J was already working on a DES that would utilize sirolimus, an immunosuppressant marketed by Wyeth. Hunter talked with the other companies while keeping an eye on Europe, where J&J was also a market leader, but nothing was settled. New stents entered the market often, and “other companies were taking market share from J&J,” says Hunter.

As he pondered his options, Hunter received an unusual offer. Cook and Boston Scientific were longtime competitors, but in order to make a more attractive offer to Angiotech, they had decided to band together, proposing a joint agreement that would allow both to develop paclitaxel-coated stents. The financial terms for both companies would be identical.

“They said, ‘We understand that if you want to deal with one company, it would be the market leader [J&J], but would you be more interested in dealing with the number two and number three companies?’ We thought it would be a phenomenally good idea,” says Hunter, especially in light of the situation in Europe, where, he says, “cardiologists were switching brands almost monthly.

It became very difficult to predict who would have the best stent.” And no matter how good the drug, if it were matched with a lousy stent, it wouldn’t have a chance. “We felt with two horses, we doubled our chances that we would be competitive.” In the summer of 1997, the three companies signed a pact.

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